USDN Triple Bottom Line Manual July 18, 2012

Transcription

1 USDN Triple Bottom Line Manual July 18, 2012 Decision Economics

2 USDN Triple Bottom Line Manual HDR developed this Return on Investment (ROI) model for the Urban Sustainability Directors Network (USDN) with input and review from Boston Redevelopment Authority (BRA). This model estimates the triple bottom line (TBL) impacts of investments economic, environmental, and social benefits. The model s structure focuses on a specific set of project investments to estimate ROI within a sustainability framework. The model is based on HDR s SROI approach to measure the economic, environmental, energy, and social benefits of these strategic investments. 1 The triple bottom line analysis model allows users to run four types of ROI analysis: 1. Energy Efficiency LEED, Energy Star, etc 2. Renewable Energy Wind, solar, etc 3. Transportation Highway, transit, bicycle, pedestrian, etc 4. Development Mixed use, transit oriented development (TOD), etc Tab descriptions This section provides a brief description of each tab within the excel model. In each tab, only certain fields will be available for the user to change. Structure&Logic Contains a graphic of the triple bottom line model s framework; ModelSetup Tables to calibrate the model. Users can select the region (state or national average) which will calibrate emissions parameters and utility rates. Users can also enter in custom wage rates. This tab contains the model s color-legend to identify cells or fields for users to input data. Model tabs o For each project type (Energy Efficiency, Renewable Energy, Transportation, and Development) there are three key analysis tabs. All tabs are numbered, grouped, and color coded together. o Inputs tab Each project input tab has fields for the user to enter in project specific input data. All input tabs are red. o Model tab Each project type has a tab which contains all the model calculations for annual cost and benefit concepts. The model tab also has a dashboard table at the top that displays all the major model information and assumptions. Model calculation tabs are purple. o Results tab Each project type has a results tab with summary data tables from the analysis. All result tabs are black. Parameters Major default parameters used within the model. The brown parameters tab is the last tab within the spreadsheet. 1 For more information, see: SROI%20Final.pdf and Urban Sustainability Directors Network 1

3 Analysis instructions Model Calibration The current form of the model is intended to be a project template. For each analysis the model should be renamed to differentiate from other analyses, or saved in a separate folder directory. Start the model calibration process in the ModelSetup tab. Refer to the Legend table to review which color coded tables and cells require user inputs. Parameters specific to each state are incorporated into the model. Filling in the following fields in the Model Specifications table will calibrate the model s parameters. Region specific and user defined assumptions are automatically adjusted through the model calibration process described below. 1. Select from the drop down box (1) the State or U.S. Average for the analysis area. This calibrates electricity generation emissions, average wages, and utility rates specifically to each state or the U.S. average. Each state generates electricity through different combinations of coal, hydroelectric, nuclear, or wind and therefore emissions vary by geography. 2. Select the region type from the next drop down box (2). This will calibrate certain emissions factors and costs to rural, urban, or dense urban areas. The more dense urban areas will accrue higher costs than rural areas. 3. Enter the starting analysis year in field (3). The default value is currently set to 2011, and will be applied to all analyses. 4. Finally enter the discount rate into field (4). The discount rate is used to compute net present value through discounting future benefits and costs (representing the time value of money), the default value is set to 5%. This discount rate will be applied to all analyses. 5. If local wage rate data is available, enter the hourly rate into field (5). This option overrides the model s state wage rate tables. The Parameters tab (brown tab at the end) displays all of the major parameters within the model including these calibrated parameters. Analysis Simulations There are three groups of color coded tabs that are used for the analysis. Each project type (Energy Efficiency, Renewable Energy, Transportation, and Development) will have its own input tab in red, a model calculations tab in purple, and a results tab in black. To begin, select the appropriate input tab and begin entering the input data. Some fields will have additional pop-up messages relaying additional guidance for inputs and some fields will restrict inputs to a certain range. Each project type will have 3 similar input tables. Table A will require key project information including the project name, the investment amount, the investment time period, useful life of the investment, and will ask what type of cost information is available. In Table A, the user must select the type of cost information available. Based upon the user s selection ( Summary or Detailed ) the appropriate cost data table will appear. By selecting Summary Table B1 will appear allowing the user to input summary based investment data. However, selecting Detailed will allow for detailed annual cost data to be entered in Table B2. Please fill in either Table B1 or B2 but not both. The remaining tables are specific to each project type. Refer to the next sections for more detailed information. The model also will provide Urban Sustainability Directors Network 2

4 an error message if the Total Investment ($) category in Table A does not match the investment totals in Table B1 or B2. Analysis Energy Efficiency and LEED The Energy Efficiency and LEED tabs will evaluate the projects that increase energy efficiency in terms of reduced energy consumption, environmental benefits, and reduced water use. Begin in the user input section by entering the project name, total investment amount, investment periods (start and end), and the useful life in years for the specific project in Table A. The remaining fields in Table A will enable the model to either evaluate the complete project cost or just the incremental cost of using energy efficient LEED certified materials versus conventional materials. So if you were to evaluate only the incremental cost and benefits of using energy efficient LEED certified materials enter the percentage of the total costs that represent the cost difference between the LEED certified and conventional materials in the Cost Parameter Adjustment Factor field. The cost parameter adjustment factor will adjust the benefitcost to utilize ONLY the incremental cost if you enter a cost parameter adjustment factor and select yes in the Use Incremental Cost Adj Factor field. For example, if LEED certified insulation costs 6% more per volume, the user would enter 6% and select Yes in the Use Incremental Cost Adj Factor. 2 Next, select Detailed or Summary in the Cost Information field. This will enable the user to enter either summary cost data or detailed annual cost information in Tables B1 or B2. Enter the full project cost data information in Tables B1 or B2; the cost parameter adjustment factor will be applied automatically within the model. Select Yes in the Use Custom Utility Rates field, if local utility rates are available. This will activate Table D, where the user can enter custom water, sewer, gas, and electric rates. Enter the savings in the proper units in Table C for energy, environmental, and water impacts. All values should be entered as a savings; therefore if the project reduces energy consumption by 50,000 kwhs annually, the value should be entered as a positive 50,000. Any increase in consumption should be entered as a negative value. Lastly, if the project is related to electricity, select the electricity consumer type to calibrate the utility cost parameters. The Dashboard table at the top of the 1.EnergyEfficiency tab for energy efficiency and renewable energy displays the major assumptions entering the analysis. Once the user input tables are filled in, the output is ready for review in the results section within the tab, and summary data tables are available in the 1.ResultsEnergy tab. Analysis Renewable Energy The Renewable Energy tabs will evaluate the costs and benefits of increasing generation of renewable energy, which in-turn reduces the use of conventional energy sources (fossil fuels). In the user input section, begin entering the project name, total investment amount, investment periods (start and end), the useful life in years, and the project type for the specific project in Table A. Selecting either Detailed or Summary in the Cost Information field will enable the user to enter either summary cost data in 2 Typically, there is a premium on LEED certified materials. The premium range depends on the materials and project. Urban Sustainability Directors Network 3

5 Table B1 or detailed annual cost information in Table B2. Finally, select either custom or standard in the Utility rates field. By choosing the standard utility rates, the model will use the parameters selected in the ModelSetup tab to pull rates from the state utility tables, while selecting Custom will activate Table D where the user can enter custom utility rates. Enter the savings in the proper units (kwhs and therms) in Table C for energy and environmental impacts. All renewable energy production values should be entered as a positive value. In Table C there is an item for a reduction in therms, which would most likely occur when a building implemented renewable energy sources which could offset or reduce the use of a natural gas boiler or generator, and thus lower the therms of heat. Lastly, enter any renewable energy tax credits provided per MWh or annual tax credits into Table E. The Dashboard table in the 2.RenewableEnergy tab displays key assumptions entering the analysis. Once the user input tables are filled in, the output is ready for review in the results section within the tab, and summary data tables are available in the 2.ResultsRE tab. Analysis Transportation The transportation tabs will evaluate the benefits and cost of roadway, pedestrian, bicycle, and transit improvements. The transportation analysis tab has precise data requirements, which require external analysis of transportation impacts. Since this is a sketch planning tool, it is assumed that analysis will likely go through an independent benefit-cost analysis. Transportation data can be obtained from most conceptual design and traffic reports or can be estimated from results tables within most traffic analysis models, for instance Synchro. In the user input section, begin entering the project name, total investment amount, investment periods (start and end) and the useful life in years for the specific project in Table A. Next select the project type: pedestrian and bicycle, roadway, transit, or multi-modal. Select multi-modal if the project improves transportation for more than one mode. Select Summary in the Cost Information field if you only have basic cost information regarding project totals. All costs will be spread out equally throughout the investment period identified in Table A. If you have detailed cost information, select Detailed in the Cost Information field and proceed to Table B2 to fill in capital and O&M cost information for each year. Tables C1, C2, and C3 are critical to the transportation analysis. Table C1 is for roadway transportation analysis. All roadway values in Table C1 that represent a reduction in traffic should be entered as a positive number. It is critical that the user only enter the change rather than the new level of VMT or VHT. All increases in traffic indicators in Table C1 should be entered as a negative number. All pedestrian and bicycle transportation data should be entered into Table C2, while all transit data should be entered into Table C3. Pedestrian, bicycle, and transit data should enter as net new traffic only and as positive values in Tables C2 and C3. The Dashboard table in the 3.Transportation tab provides summary information of all the transportation data entering the model. Once the user input tables are filled in, the output is ready for Urban Sustainability Directors Network 4

6 review in the results section within the tab, and summary data tables are available in the 3.ResultsTransp tab. Analysis Development The Development tabs are for analysis of development projects, like TOD, that improve density, walkability, retail sales, and other economic impacts. In the user input section, begin entering the project name, total investment amount, investment periods (start and end) and the useful life in years for the specific project in Table A. Select Summary in the Cost Information field if you only have basic cost information regarding project totals. All costs will be spread out equally throughout the investment period identified in Table A. If you have detailed cost information, select Detailed in the Cost Information field and proceed to Table B2 to fill in capital and O&M cost information for each year. Table C is split into five major development impact categories: 1) retail sales, 2) health and walkability, 3) real estate, 4) economic impacts retail, and 5) economic impacts - office. The retail sales portion of the table focuses on new spending and retail sales in the area due to the development investment. The change in retail sales should be confined to the development building or a short radius around it (e.g. within 0.25 miles of the development). The real estate section focuses on property value premiums and increased property tax collections due to the development investment. Since an increase in property value is gradual, the property value premium is spread over the useful life of the investment following the completion of the project. Lastly, the economic impacts provide a metric for net new retail and office businesses in the area in terms of jobs and wages. The Dashboard table in the 4.Development tab provides key assumptions entering the analysis. Once the user input tables are filled in, the output is ready for review in the results section within the tab, and summary data tables are available in the 4.ResultsDevelop tab. Analysis Tabs The model calculations tabs in purple have four major components. First, the Dashboard table at the top displays many of the user inputs and assumptions for the analysis. Second, the capital cost section displays the annual investment and any operations and maintenance costs. Third, the benefits section provides the individual calculations for each benefit concept. Finally, the results section displays the benefit-cost analysis and the itemized components entering the benefit-cost framework. The results section also includes a cash flow analysis which determines the payback period, return on investment, and internal rate of return. The major results are linked to the results tabs. Urban Sustainability Directors Network 5

7 Results Tabs The result tabs each contain major results of each analysis. The TBL Results 2020 table provides typical decision metrics from the benefit-cost analysis and annual benefits for the year These metrics include: Net Present Value (NPV): The net value of an investment, calculated as benefits less costs, with both expressed in present-value monetary terms (PV Benefits PV Costs). Return on Investment (ROI): The arithmetic average rate of return per year on capital invested. Discounted Payback Period (DPP): The period of time required for the discounted return on an investment to recover the sum of the original investment. Internal Rate of Return (IRR): The discount rate at which the net present value of a project would be zero. Benefit-Cost Ratio (BCR): The overall value of money of a project, expressed as the ratio of the benefits of a project relative to its costs, with both expressed in present value monetary terms (PV Benefits / PV Costs). Each results tab also includes the annual value of benefits for each project for the year The annual benefit categories will vary as each project type has its own specific set benefits (e.g. transportation and energy project benefits will differ). Additionally each project type will have supplementary benefit tables specific to each project for the year Urban Sustainability Directors Network 6